Question

If A sells to B, and B obtains title while goods are in transit, the goods were shipped .If C sells to D, and C maintains title until the goods arrive at D’s door then the goods were shipped _______. a. FOB shipping point, FOB destination.b. FOB destination, FOB shipping point.c. FOB destination, FOB destination.d. FOB shipping point, FOB shipping point.

Answer 1

Answer:

The answer is a. Free on Board (FOB) shipping point, Free on Board (FOB) destination.

Explanation:

In the case of A to B, the goods were shipped at FOB shipping point because the title passes to B while the goods are in transit. FOB shipping point means that the seller of a goods passes the title to the buyer at the point where the goods are being delivered to the designated carrier of the buyer.

In FOB shipping point, once the goods have transferred to the carrier to convey to the buyer, the buyer obtains title immediately not minding that the goods are yet to arrive at the buyer`s door. In addition, any risk of damage or loss of goods in transit are solely borne by the buyer because title has passed immediately seller transfers the goods to the carrier designated by the buyer.  This is true in A to B case because B obtains title while goods are in transit. So the goods were shipped at FOB shipping point.

For C to D, the goods were shipped at FOB destination because buyer obtains title only when the goods arrive at his/her door. Conversely yo FOB shipping point, the risk of damage and loss of goods in transit is entirely borne by the seller because the title has not passed to the buyer until the goods arrive at the buyer`s door.